A quiet month for the agency industry following the rush to beat the government’s stamp duty deadline, has been blamed as one of the causes for poor economic figures.
The UK economy shrank by 0.3% in April, the latest data from the Office for National Statistics shows. Services shrank by 0.4% and production by 0.6%, but construction moved in the opposite direction, growing by 0.9%.
Economists had expected a 0.1% contraction in April after growth of 0.2% in March.
Stamp duty changes announced by Chancellor Rachel Reeves at the Budget last October came into force in April.
ONS director of economic statistics Liz McKeown says: “Both legal and real estate firms fared badly in April, following a sharp increase in house sales in March when buyers rushed to complete purchases ahead of changes to Stamp Duty.”
Overall, however, the economy still grew as a whole in the last three-month period, McKeown said.
Meanwhile next week is yet another ‘crunch time’ for the UK economy with both official inflation and Bank of England base rate announcements.
Susannah Streeter, head of money and markets at business consultancy Hargreaves Lansdown, advises that expectations should be managed – strictly.
“The chances of an interest rate cut this month look super-slim, given that inflation is expected to remain elevated. Even though high wage growth is easing off and vacancies are falling as firms hold back from recruiting, pay growth is still outpacing inflation.
“Add Trump’s tariffs into the mix of uncertainty, and policymakers are set to stay in wait-and-see mode, taking longer to assess the path ahead for prices.”
Inflation was predicted to peak at 3.7% this year before starting to fall back. Because the labour market is weakening more quickly than expected, two interest rate cuts are now expected, one by September and another in December.